SA law gives state free 20% stake in gas, oil ventures

Companies / 12 March 2014, 6:23pm

Reuters

Cape Town - 100813 - National Assembly at Parliament in Cape Town - Photo: Matthew Jordaan

Cape Town - South Africa's parliament passed changes to its main petroleum law on Wednesday, giving the state a stake of 20 percent in new gas and oil exploration and production ventures, a move industry said would have a chilling effect on investment.

The bill also gave the mines minister wide-ranging discretionary powers to place certain minerals in a “value-addition” category, which means a portion of the extracted resource would have to be processed domestically instead of exported in raw form.

The haste in which the bill was passed ahead of general elections in May has alarmed petroleum operators such as Shell, Total and Exxon Mobil, which are looking to explore in South Africa in the wake of big offshore gas discoveries in neighbouring Mozambique.

“There have been significant changes in recent days, which we have not been afforded an opportunity to comment on and which we are certain will have a chilling effect on investment in a high risk and capital intensive industry such as ours,” the Offshore Petroleum Association of South Africa said in a statement ahead of the bill's passage in parliament.

Among its members are Shell, Anardarko, petrochemical group Sasol and BHP Billiton Petroleum.

In addition to the envisaged 20 percent “free carried interest”, the government introduced a new clause entitling it to further participation in the form of an acquisition at an agreed price or production-sharing agreements.

In mining, the aim of the bill is to create jobs in a country with an unemployment rate of around 25 percent and to add value to its abundant natural resources, which include close to 80 percent of the world's known platinum reserves.

Producers of designated minerals would have to offer a portion of their production to local processors in prescribed quantities, qualities and timelines at an agreed price.

“We are here to table this bill as one of the most progressive steps in improving and contributing to our economic development,” Mineral Resources Minister Susan Shabangu told parliament.

The Mineral and Petroleum Resources Development Amendment Bill was passed by 226 to 66 votes in the African National Congress-dominated national assembly.

It must still be signed into law by President Jacob Zuma before it becomes effective. - Reuters